Bacardi Is Buying Patrón Tequila for $5.1 Billion

Big tequila deal: Bacardi Ltd. is apparently buying Patrón Tequila. The deal, announced today, values the Patrón brand at $5.1 billion, and is noted to be one of the biggest liquor deals in recent history.

Most drinkers know Bacardi for its rum, but its purchase of Patrón doesn’t come out of nowhere. For nearly a decade, Bacardi has held about a 25 percent stake in Patrón Spirits International AG, Wall Street Journalreported.

In this next step, Bacardi will gain full control of the Patrón brand, planning to increase Patrón’s distribution to take advantage of an increased demand for premium tequilas.

Tequila has been increasing in popularity over the last decade, giving global liquor producers reason to raise its image and price point. According to market research firm, Euromonitor International, Patrón’s sales reached $1.6 billion in the U.S. in 2016, making in the leading tequila brand in the U.S.

Purchasing Patrón is a strategic next step for Bacardi, due to the global trend toward premium tequila. Patrón’s only competition at this point are celebrity brands, such as George Clooney’s Casamigos and Justin Timberlake’s Sauza 901. Incidentally, Diageo PLC acquired Casamigos tequila in June, and swapped out its Irish whiskey brand, Bushmills, for Don Julio tequila in 2015. Pernod Ricard USA also announced this month that it purchased the remaining 16 percent of Avión tequila, of which it formerly owned 84 percent. And, according to the Distilled Spirits Council, U.S. volumes of super-premium tequila skyrocketed more than 700% from 2002 to 2016, and tequila volumes rose 121 percent over the same period.

If this deal goes through, Bacardi will become the second largest spirits company in the U.S, second to Diageo.